NASSAU, Bahamas, CMC – Central Bank Governor John Rolle says The Bahamas remains a center of choice in the western hemisphere for private wealth management despite several global challenges.
Addressing a ceremony marking the 65th anniversary of the Bank of Nova Scotia Trust Company (Bahamas) Ltd, as a financial institution operating here, Rolle said its presence” is a testament to a sound business model that has successfully adapted, as our financial sector continues to align itself with evolving global regulatory and compliance standards.”
He said that the international financial services sector has undergone significant transformations in the six and one-half decades since Scotia Trust was established.
“While the employment and direct economic contribution have held up better than most of the other indicators of the sector’s footprint, we would like to see a comprehensive growth trend re-established.”
Rolle said that transitioning out of the 1960s, the Bahamian register of banks and trust companies was drastically reduced “to weed out hundreds of entities damaging the center’s reputation.
“From the 1990s onwards, in response to multilateral efforts, which were not always pleasant, global standards on AML/CFT (anti-money laundering and combating the financing of terrorism) became more pressing.
“The Bahamas tightened supervision again to emphasize physical presence requirements and increase human resources capacity to staff compliance functions within supervised institutions. Again, licensee numbers trended lower.”
Rolle said overlapping with this adjustment, the emphasis also shifted from a bilateral focus on tax transparency and cooperation with the United States to embrace the multilateral efforts of the Organisation for Economic Cooperation and Development (OECD), which he said now also has a vital European Union component.
“The industry impact of these initiatives has been felt regarding the shift of some institutions and clients back to their home countries, especially Europe. In addition, there has been an efficiency-driven consolidation in global banking and trust operations, reducing the scale of presence in The Bahamas.
“As a result, especially in the last decade, the economic contribution of international banking and trust services has decreased. However, as a testament to the depth of skill and talent that support physical presence activities, the adjustments were of significantly lower magnitude than the balance sheet reduction. Likewise, a positive trend has been Bahamians’ increased ownership of financial services firms.”
Rolle said that in terms of the sector outlook, there is now positive momentum for wealth management business from Latin America, and firms also see increased opportunities in Asia. However, the business shift back to Europe still overshadows this trend.
He said at the industry level, there is an established understanding of how to position The Bahamas for more growth in a transparent, globally compliant environment, both in terms of financial integrity and tax transparency.
“In particular, it is important that we continue to upgrade, enabling product regulations and the operational ease of doing business. Our standards and regulations must also continue evolving, always tailored to what is the best fit for The Bahamas while achieving the intended international results. Further, we must allow ourselves to be more proactive to emerging threats.”
He said the Central Bank’s approach ensures that its supervisory and regulatory standards remain fit for purpose and supportive of the sound reputational environment in which domestic and international financial services are conducted.
“We continue to do so in a consultative approach with industry and close collaboration with other regulators and the critical stakeholders within the government.”
Rolle said that managing the country’s reputation is essential on top of the technical compliance and effectiveness ratings it has achieved for transparency and cooperation in bilateral and multilateral matters.
“But we are still trying to convince that the global process is either entirely effective or objective, and there is a sense that it harbors biases against smaller international financial centers that must be confronted.
“The Central Bank has been bringing this attention to light in its Annual AML research conference, which for the past three years has convened the leading scholars and standards setters on this topic to uncover the empirical connections between global standards and methods and measures of success in deterring financial crimes.”
He questioned what the researchers have uncovered, noting that “the effort is desperately costly for smaller countries and that more data should be made available to link outcomes to the level of costs for efforts being exerted.
“The estimates are that based on the value of confiscated or recovered assets, it is costing authorities more than ten times the amounts spent on enforcement. But the reforms in this respect would also have to take a multilateral approach.”
Rolle said starting next year, the Central Bank would continue with this effort and is also planning to work more closely across the industry with the government and other regulators to “improve our international outreach and put a dent in misperceptions that could harm our reputation.
“However, this is separate from preparation already being made for the fifth round of the FATF mutual evaluations on AML effectiveness that will begin in 2024. The Bahamian regulators and other government stakeholders, under the lead of the Attorney General, have started the self-assessment to identify and close gaps in our technical and effectiveness compliance with the FATF standards and strengthen our readiness for the fifth round.
“Again, there will be intensive industry consultation so that all stakeholders can understand any identified risks in our jurisdiction and how these are being managed.”
Rolle said that it is also positive, as far as the country’s international obligations and positioning are concerned, that discussions on corporate income taxes are at such a developed state in The Bahamas.
“With the right framing and safeguards, reforms of this nature would also have a favorable impact on public finances,” he added.
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